ARIZONA
HOUSE OF REPRESENTATIVES
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HB 2590: rural growth investments; tax credits |
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PRIME SPONSOR: Representative Cook, LD 8 BILL STATUS: APPROP |
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Relating to a tax credit for rural development.
Provisions
Tax Credit
1. Establishes a tax credit for credit-eligible capital contributions to an ACA-certified Fund beginning TY 2019.
a. Prohibits a credit against the portion of tax payable to the Fire Fighter's Relief and Pension Fund and PSPRS. (Sec. 1, 4, 5)
2. Specifies the aggregate credit is the amount specified in the ACA-issued certificate. (Sec. 1, 4, 5)
3. Allows the taxpayer to claim and apply up to 25% of the aggregate credit amount for each TY that includes the third through sixth anniversaries of the certificate's closing date, excluding any amount carried forward. (Sec. 1, 4, 5)
4. Requires the taxpayer to submit a copy of the tax credit certificate with each year's premium tax report or tax return to claim the credit. (Sec. 1, 4, 5)
5. Permits the credit to be carried forward up to 10 consecutive TY. (Sec. 1, 4, 5)
6. Allows the taxpayer to transfer the certificate and carryforward amount to an affiliate. (Sec. 1, 4, 5)
7. Enables the affiliate to apply any remaining credit amount and carryforward against their tax liability, subject to the following:
a. limits the transfer to a single affiliate;
b. requires written notice of the transfer within 30 days as specified;
c. provides that the time to use the credit is not extended; and
d. disallows the credit to be claimed if the ACA revokes the certificate for noncompliance. (Sec 1, 4, 5)
8. Prohibits ADOR and ADOI from allowing a taxpayer to claim any further credits if the ACA revokes their tax credit certificate. (Sec. 1, 4, 5)
Rural Growth Investment
9. Requires the ACA to establish a procedure to accept and evaluate applications for tax-advantaged rural growth investments beginning September 1, 2018.
a. Requires applications to be accepted by October 1, 2018. (Sec. 2)
10. Permits a qualified investment company to apply to the ACA for approval as a Fund.
a. To qualify, the company must be a licensed rural or small investment company and must have invested at least $25 million in nonpublic companies located in rural areas. (Sec. 2)
11. Stipulates application requirements, including a fee prescribed by the ACA. (Sec. 2)
12. Limits the ACA from approving more than:
a. $50 million in investment authority;
b. $30 million in credit-eligible capital contributions;
c. $20 million of investment authority for any individual Fund. (Sec. 2)
13. Bars the amount of credit-eligible capital contributions from exceeding 60% of the amount of investment authority under any Fund application or the approved aggregate amounts. (Sec. 2)
14. Directs the ACA to approve or deny the application within 30 days.
15. Requires an application approval to include the amount of the approved investment authority. (Sec. 2)
16. Outlines the following reasons to deny an application:
a. the application is incomplete;
b. the applicant fails to meet required criteria;
c. the projected state and local tax revenue under the applicant's business plan does not demonstrate a positive revenue flow that would exceed the cumulative amount of tax credits issued over a 10-year period;
d. the credit-eligible capital contributions exceed 60% of the total investment authority; or
e. the ACA has already approved the maximum amount of investment authority and credit-eligible capital contributions. (Sec. 2)
17. Allows an applicant to provide additional information to complete, clarify or cure application defects within 15 days after the denial notice and requires the ACA to review and reconsider the application within 30 days of resubmission. (Sec. 2)
18. Requires, within 60 days of approval, a Fund to collect credit-eligible capital contributions from each investor and one or more cash investments that, in combination, equal the investment authority and:
a. be in equity interest or a debt instrument issued, at par or premium, that has a maturity day at least five years after the closing date; and
b. least 5% of the Fund's investment authority must be equity investments by affiliates. (Sec. 2)
19. Instructs a Fund to send evidence to the ACA that the required amounts have been collected within 65 days of approval. (Sec. 2)
20. Directs the ACA to provide a tax credit certificate to each investor. (Sec. 2)
21. Provides that the investment authority and unused credit-eligible capital contributions do not count towards the limit on total investment authority if the tax credit certificate is revoked.
a. Directs the ACA to first award reverted authority pro rata among Funds that were awarded less than the requested investment authority and remaining investment authority capacity to new applicants. (Sec. 2)
22. Prohibits the Fund from assessing or collecting a management fee. (Sec. 2)
23. Requires the Fund to invest 100% of its authority in rural business within 24 months after the closing date and at least 20% in eligible rural businesses with less than 50 employees to maintain the validity of the tax credit certificates issued. (Sec. 2)
24. Allows a Fund to request a written opinion from the ACA as to whether the business it is considering investing in is a rural business concern and requires the ACA to respond within 15 business days.
a. Considers the business a rural business concern if the ACA does not respond in a timely manner. (Sec. 2)
25. Requires the rural business concern, at the time of the initial investment, to meet the following requirements:
a. have fewer than 150 employees and not more than $10 million in net income for the prior TY.
b. have its principal business operations in one or more rural areas of Arizona;
c. for an out-of-state business and agreement to relocate employees using proceeds of a rural growth investment to establish its business in a rural area of Arizona within 180 days of receiving the investment, unless the ACA agrees to an extension;
d. be engaged in the manufacturing, agribusiness or technology industry, or related services, or any other commercial activity requested by the Fund that the ACA determines will be beneficial to the state, excluding real estate, retail and marijuana enterprises. (Sec. 2)
26. Instructs the ACA to revoke any tax credit certificates issued to investors in the Fund and notify ADOI and ADOR of the revocation if the Fund:
a. fails to invest 100% of its investment authority in rural growth investments in Arizona within two years after the closing date;
b. fails to maintain 100% of its investment authority in rural growth investments through the anniversary of the sixth closing date;
c. makes a distribution or payment that results in the Fund having less than 100% of its investment authority available for investment and held in cash or other marketable securities;
d. invests more than the greater of $5 million or 20% of its investment authority in a single business concern, including amounts invested in affiliates; and
e. makes a rural growth investment in a rural business concern that directly, or indirectly through an affiliate, owns, has the right to acquire an ownership interest in, makes a loan to or makes an investment in the fund, an affiliate or an investor in the Fund. (Sec. 2)
27. Directs the ACA to notify the Fund of the reason for the pending revocation before revoking any tax credit certificate and allows the Fund to correct the violation within 90 days. (Sec. 2)
28. Permits a Fund to apply to exit the program on or after the anniversary of the sixth closing date and requires the ACA to respond within 30 days. (Sec. 2)
29. Specifies that sufficient evidence to exit is that no tax credits have been revoked. (Sec. 2)
30. Prohibits the ACA from unreasonably denying an exit application and specifies such notice must include the reasons for denial. (Sec. 2)
31. Prohibits the ACA from revoking a tax credit certificate after the Fund associated with the certificate has exited the program. (Sec. 2)
32. Requires the Fund to submit a report as specified:
a. two years and five business days after the closing date to the ACA; and
b. by the last day in February of each year thereafter to the ACA. (Sec. 2)
33. Instructs the ACA to submit a report on approved and participating Funds by August 31 of each year to the Governor and the Legislature (Sec. 2)
34. Defines affiliate, closing date, control, credit-eligible capital contribution, investment authority, principal business operations, rural area, Rural Growth Fund and rural growth investment. (Sec. 1, 2, 4, 5)
35. Adds the credit to the Tax Credit Review Schedule for years ending in 3 and 8. (Sec. 3)
36. Contains a purpose statement. (Sec. 6)
Additional Information
A tax credit is a dollar-for-dollar reduction in the taxpayer's income tax liability. Tax credits are often offered to incentivize some type of action from a taxpayer, such as creating new jobs, investing in environmentally friendly technology or any other action deemed beneficial to the economy.
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Fifty-third Legislature HB 2590
Second Regular Session Version 2: Appropriations
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